Forbes has a very interesting Q & A with portfolio manager Ralph Shive of the First Source Monogram Income Equity Fund. The article is long but here are some of the highlights along with the top 10 holdings of the fund. Dividend Investing For An Empire In Decline

Ralph Shive thinks America's best days are behind it. The country has peaked, he thinks, and is preparing for a period of bitter decay. That depressing outlook guides the longtime money manager's investment thesis: He's staying defensive, committing capital to what he sees as big, stable, safe companies.

Investors might disagree with Shive's dim view of the nation, but they can't quibble with the man's awesome performance as an investor. Shive is the lead manager of First Source Monogram Income Equity (FMIEX), a no-load fund that invests in what he deems to be undervalued stocks that pay sizable and stable dividends.

Forbes.com: Warren Buffett says it's time to buy. You agree?
Shive: Well, I am always in the market. I have had cash at about 15% going on five quarters now. So I am still concerned and defensive. The main theme here is bigger, safer and higher-quality companies. That has to be the theme when you are in a bear market. The weaker ones get wiped out. I missed most of the housing and mortgage problems, but I have problems all over the place now.

Explain your investment strategy.
I generally follow the traditional value strategy: low P/E, low price-to-cash flow. I am pretty eclectic, though. I am maybe a bit more flexible than some firms. I'm not real market-cap sensitive. Every stock doesn't need a dividend yield, but I do want my portfolio to yield well above the S&P 500.

Why do you look for companies with above-average dividend yields? What does that tell you about the company, as an investor?
You don't just buy yield for yield. People were doing that with financials. They weren't seeing the macro picture. You want the stability of the dividend. But you have to like the company and the outlook. You have a higher probability of returns with a dividend than you do with share-price appreciation.

S&P says it was the worst September for dividends since it started keeping dividend records in 1956. So, in this kind of environment, how do investors know if their dividends are safe?
It is very difficult in the financials. I have had two life-insurance companies recently reduce their dividends on me: Lincoln National and Hartford Financial Services. I have been around long enough to remember that back in the 1980s, a lot of industrials went through a tough time. Many of the industrial companies cut their dividends. This time, the center of the storm is the financials. That's the epicenter of the problem. But I feel better about consumer staples, energy and industrials. They are paying their dividends. The financial space is suspect.

Top Ten Holdings:
Johnson & Johnson (JNJ)
Allstate (ALL)
Microsoft (MFST)
General Electric (GE)
Novartis (NVS)
PepsiCo (PEP)
Abbott Labs (ABT)
Sysco (SYY)
Eli Lilly (LLY)
JP Morgan Chase (JPM)

Disclosure: The Div Guy owns shares of JNJ, GE, PEP, and ABT at the time of this post.